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There are 2 types of Fiscal policy. The Contractionary Fiscal Policy which is dub as the surplus policy. This is where a government will plan to spend less money than what it receives through taxation. This will help to increase government saving and decrease consumption and investment spend through higher taxes. With the money saved up by the government the government can use it to invest it into a large firm which otherwise would have to find funding from overseas investors, also to pay back Australia overseas debt which decrease the current account deficit effecting external balance. This will in turn decrease the AD curve...
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